5 Great Questions To Ask Franchise Company Executives Before Buying A Franchise

If you’re looking to become a franchise owner, there are several ways for you to increase your chances of success. One way is to arrange some time to talk with the operations people at franchise headquarters, and if possible, the president of the company. Some well thought out questions can have a huge impact on your decision to become a franchisee.

Here are five questions that most people I’ve consulted with never thought to ask:

Can I have some specific examples of problems that your franchisees have experienced, and how your employees jumped in to help out?

(You are trying to find out how good their support team is. There should be some great “stories” of how they were able to alleviate a franchisee’s problems)

What types of people have you found to be super-successful as franchise owners in your system, and what types of people have been below average?

(You are trying to find out if there are any patterns that you can detect with either the really successful franchisees, or the ones that have not done so well.)

What are some of reasons you have turned down prospective franchisees?

(Here, you are trying to find out how serious they are about finding the best franchise owners.)

Do you have any ongoing litigation with any franchisees? Can you tell me about it? If not, if you’ve had any litigation in the past, can you share what it was about, and how it ended up?

(Lots of franchise and non franchise companies experience the many pleasures of lawsuits. Listen carefully to their answers. Who sued who? What really happened?)

Are there any major technology/equipment upgrades planned for the current system?

(Upgrades could be equipment upgrades that the individual franchisee has to pay for, or major technology upgrades that the franchise company pays for.)

Questions like those are not commonplace. That’s the point. The more you can learn before you invest, the better you’ll feel when you write a $35,000 check for the up-front franchise fee to the franchisor.

The entire business world is becoming more transparent. Allow me to rephrase that; The entire business world is learning that transparency is really the way to do business. Not many industries will be able to escape this fact in the near future.

Shel Holtz and John C. Havens wrote a book called “Tactical Transparency” last year, and it’s an important one. Here’s what Paolo Tosolini, the New Media Business Manager at Microsoft Corp. said after reading the book;

“Transparency is a necessary journey that takes effort and time, but has high rewards. Organizations of any size should recognize the value of being transparent and make employees part of the journey.”

Employees of the franchise companies that you are researching may or may not be able to answer some, or even all of these questions. If they can’t, they should at least be willing to go the extra mile to get those questions answered, though.

Recently, a franchise candidate of mine submitted a list of questions to a franchisor that were amazing. The franchise director came back with answers to all of them within 24 hours. Even I was impressed. I wasn’t as impressed as my franchise candidate though. He’s getting ready to visit the California headquarters of this franchisor, and make a yes or no decision.

Do you think it had to do with the way they consciously chose to handle my candidate. (A guy who just wants to make sure he’s doing the right thing for himself, and his family.)

Update! The gentleman who visited franchise headquarters in California decided to become a franchise owner. His in-person visit with the executives of the franchise company mirrored the phone and email exchanges that took place during his information gathering stage. His expectations were met. (According to my franchise candidate, they were “exceeded.”) In the end, that’s all he wanted.

Consumers can’t be “slammed” into making purchases anymore. They want to feel that they are in control of the buying process like never before. Companies that understand this will be successful ones. Companies that allow the buying process to happen naturally, will win. Companies that refuse to adapt to our rapidly changing buying environments, will fade away.

Joel Libava is the Franchise Expert for Small Business Trends. Joel, The Franchise King®, equips today’s prospective franchise owners with time-tested, proven techniques designed to increase odds of success. He does this through one-on-one coaching, and gobs of useful content that can be found on places like Small Business Trends, SBA.Gov, and his award-winning franchise blog, The Franchise King Blog . He’s been featured in Entrepreneur® magazine, and is frequently called upon by national media outlets and publications for his no-spin insights into the world of franchising.

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22 Reactions

Hey Joel,
What a useful set of questions to consider when buying or evaluating a franchise. Some of these, with appropriate twists, would also be helpful questions to ask a potential vendor. There’s so much at stake in beginning a new company — and the franchise is often tested, but for the new owner-to-be, it is still a new company. Thanks for putting yourself in your franchise buyer’s shoes and trying to solve real problems and challenges they face in the decision-making process.
TJ

Interesting article. As a former franchise holder (and on several occasions, a possible franchiser), I can attest to the power of a great system for helping to create great opportunities for the right people.

But this “What types of people…” question is not only wrong, it is very dangerous. Like the oft debated “What type of person makes a great leader?” There is no way to know with certainty.

IMNSHO, you just cannot look at others and their track records to determine your ability to succeed. Yes, you can look at trends and learn from others, but it almost always comes down to the individual’s desire to succeed and willingness to do whatever it takes to achieve that success.

Thank you taking the time to read the post and comment. The “What types of people” question IS an important one. I guarantee that if a franchise candidate of mine makes 10 random phone calls to franchisees of the concept that he or she’s interested in, and he/she feels no connection with most of them, the system is probably not going to be a fit for he/she.

As humans, we tend to do better in systems that bring commonalities together. If my candidates have some things in common with existing franchisees of a particular system, the chances that there will be a good fit do increase.

Why do you think 12-step programs are so successful? It’s because the folks in those groups have a lot in common. If they didn’t the programs just wouldn’t work as well as they do.

First, my research finds, “The Harvard Medical School says that the vast majority of the people who successfully quit drinking for a year or more — eighty percent of them — do it alone, all by themselves, without any treatment program or support group.”

I am simply suggesting that this one question is not on par with the other four. I can appreciate you have found otherwise. For me, it is too subjective.

I have been in the franchising business for years and have had the chance to interview many franchisee applicants. It is astonishing what they DON’T ask even as they prepare to lay down serious money and commit themselves to a long-term contractual commitment. If you are talking to franchisers, ask these questions and consider reacting as I suggest:

1. Who, specifically, are the customers your business model targets? If the response is “whoever drives by” or “gee, you ought to know that everybody needs a haircut,” make a quick getaway.

2. What, specifically, are the products and services your business model focuses on? If the response is “we try to take care of all of our customers’ needs” or “gee, there are literally hundreds of different health care products, aren’t there?” close your checkbook and leave immediately.

3. How do your business processes and procedures add to the products and services you offer to create the perception of value in the customer’s mind? If the response is “we have the lowest prices in the business” or “customers just seem to love us!” head for the nearest exit.

4. What are the three most important contractual requirements you, as franchiser, will require of me, the franchisee, and how will they contribute to the profitability of my business? If the response is…well, you get the idea.

My point is that if a franchiser does not have a straightforward business model that can be clearly explained in reasonably simple language, then you should look for something else to do with your time and money.

Also remember that by asking the franchise employees you may be getting only one side of the story. It came up in the comments and I would reiterate it, you need to talk to actual franchise owners. They’ll give you the other side of the story and help you make an even more informed decision.

As one who bought a franchise system and was disappointed in the outcome I’d also suggest asking questions or doing research to determine:
– What’s the balance between the franchisor selling franchises and supporting the franchisees to succeed?
– Does the franchisor have brand awareness and true and active leadership in the industry?
– Can you, as the franchisee be willing to follow their system and subject your way of doing things to theirs…or are you independent minded to the point that you will want to operate your way?
– How reputable, supportive and effective are their suppliers?
– Do you really need to buy a franchise to be part of a successful brand, or would you be better off building your own personal brand? Anyone considering a franchise investment should first read Gary Vaynerchuk’s book, “Crush It! Why now is the time to cash in on your passion.”

First of all after following Joel’s website I’m not sure you will find a person who knows more about franchising than him. He also is extremely passionate about the franchise world and I think the 5 questions above are exactly what a perspective franchisee should be asking the franchisor. I also think Greg brings up some great questions as a former franchisee. However, if a franchisee doesn’t ask these questions then the franchisor has an obligation to address the issue of what exactly is required of the franchisee and what kind of support will be offered by the franchisor.

I’m a bit late in hear with a comment, but after reading the post i wanted to add one idea. I’m actually a franchisor so have a particular set of insights into this, but if I were a prospective franchisee I would actually ask if it was possible to get a reference from an ex-franchisee. Things can always go wrong, however, a good franchisor should actually have managed to stay on positive terms with an ex-franchisee, they don’t have to be the best of friends, but the whole termination process should have been ethical and fair. From my point of view a franchisor that is even supportive of ex-franchisees is going to be one you know you can rely on. It’s rule of thumb i generally try and follow, getting a reference from people you know a company wants you to get a reference from is no good. Wherever possible i try and find ex-clients to get references from.

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